Introduction to The Foreign Exchange Market
The Foreign Exchange Market (Forex) is a global decentralized Financial market where currencies are traded one against the other. The Forex market is a vast financial market, the largest in the world, with daily volumes of more than $5 trillion.
What is the Forex Market?
Forex is an acronym for FOReign Exchange and it is a global market where currencies are traded one against the other, forming currency pairs (EUR/USD, USD/JPY, etc.). The Foreign Exchange market is not situated at a specific physical location, it is operating without a central service the same way as the world-wide-web (internet). The Forex transactions are placed and executed via the Electronic Network of Banks (ECN) through phone or via the Internet.
The highest daily market activity takes place in the UK (36%), followed by U.S. (17%) and Japan (6%). The FOREX market operates 24 hours and 5 days a week, from Monday through Friday.
Chart: Forex Market Activity
The Forex Spot Market
The Forex Spot Market was introduced in 1971. Forex Spot or Cash Market means trading at whatever the price is at the moment. Payments for import and exports of goods and services are made through the Foreign exchange market. This part of the market is called the consumer Forex market.The Forex market consists many different participants including Central, Banks, Commercial Banks, Investment Companies, Brokers, Commercial Firms, Institutional and Retail Investors, etc.
The Retail Forex Market
The interbank retail Forex market for small speculators begun in 1994. Later, in 1999 FXCM started to break down large interbank units into small units and gave birth to the retail Forex market as we know it today. For the first time, small individual traders had the opportunity to trade in the Foreign Exchange market.
Forex Time Frames & Trading Styles
There are many ways to trade the Foreign Exchange Market and many different trading styles to choose. The main variable differentiating all trading styles is Time Frame used.
Five (5) Types of Retail Forex Traders
We could discriminate five different types of Forex traders in accordance with the Time Frame used (*):
Choosing the Right Time Frame to Trade Forex
In general, the shorter the time frame you use the higher your trading cost will be, and the higher the time required to be devoted monitoring your positions. The use of high capital leverage in day-trading forces stop-loss and take-profit orders to be considerably narrow. Shorter Time Frames are more difficult to trade.
On the other hand, a wide Time Frame requires low capital leverage and wide stop-loss / take-profit orders. The time required to be devoted monitoring your positions is a few hours per week.
Find Trading Tools and Tutorials:
eBOOK: TRADING WORLD MARKETS USING PHI AND THE FIBONACCI NUMBERS (2018)
Complete Guide to Fibonacci Trading with Reference to Elliott Waves, Gann Numbers, and Harmonic Patterns